Colorado remains a state of mixed blessings, in terms of its economy and taxation policies. The state boasts the 11th best average income in the country, and the state's population is growing dramatically all the time, with some estimates stating that it may have grown by nearly 20% between 2000 and 2009. This is because Colorado has a very inviting tax climate for businesses and individuals alike, and as businesses go, the work force follows.

Many major corporations have flourished in Colorado, and many more have relocated there, taking advantage of the state's fairly low flat income tax. Colorado also has a strong mining and livestock industry that has existed for longer than Colorado has been a state. In all respects, Colorado should have a thriving economy, and in many sectors it does, but this has not been seen at the level of state government, especially in light of the recent economic crisis.

Though Colorado is lucky to have a fairly low unemployment rate compared to the rest of the nation (about 7%), the state has been one of many that have faced severe budget difficulties over the last few years. While the state maintains fairly good credit, at least compared to states like Arizona, Colorado has had to slash its budget considerably to account for its revenue shortfalls, meaning that it has been forced to take drastic measures, such as implementing furloughs on state employees and dismissing employees from non-essential and essential positions.

While many businesses and citizens of Colorado would be inclined to disagree, many criticize Colorado's relatively low income and sales taxes to the shortfall, with many recommending that Colorado try to raise taxes considerably to alleviate the problem. However, this becomes a double-edged sword in many respects, as higher taxes could curb the economic and population growth that has been one of the state's economic triumphs. It is an ongoing debate, one that will need to be addressed as Colorado tries to protect its position as one of the country's emerging economic powers.

Income Tax:

Any individual who resides in Colorado full or part time or draws income from employment, property or business interests in the state, and who is required to fill out a federal income tax return, is subject to Colorado income tax. In Colorado, the income tax rate is not progressive, representing a flat 4.63% for all income groups, which is fairly low by state standards.

In addition to a flat income tax rate, Colorado offers a number of tax incentives and deductions for numerous groups. Pensioners between 55 and 64 years of age are exempt from taxation on the first $20,000 of their income, and $24,000 for people 65 years of age and older. A similar incentive is available to individuals with a military pension. Tuition payments to qualified institutions can also be deducted from gross income, as well as income from U.S. Government bonds and Treasury bills. There is also a child care credit for individuals making less than $60,000, which is almost 50% above the state's average yearly income.

Corporate Income Tax:

Colorado's corporate income taxes are fairly lucrative by state standards, as they operate under the same flat tax of 4.63% that applies to individual income tax returns. In addition, the state offers many incentives to corporations in the form of deductions, including allowing corporations that earn income from other states to deduct income tax payments to those states on their Colorado state return. Most notable is the fact that the state income tax is taken after federal adjustments and deductions have been made, making the flat rate is taken from a more limited pool of total income.

This is one of the reasons why Colorado has been very popular home base for defense contractors, high technology firms, food processors, and beverage distributors, especially over the last few decades. As a result of this, Colorado has become one of the fasted growing states in terms of population, as more businesses are coming to the state all the time, with the flat tax making it extremely lucrative for employees (and businesses) looking to relocate.

Property Tax:

Property tax in Colorado is assessed and collected on the county level, but is overseen by the statewide Colorado Division of Property Taxation, which tries to regulate property taxes so that there are not wide variations between counties throughout the state. Property taxes in most Colorado counties are calculated by assessment of valuation, which determines the market value of a property, and then draws a percentage based on what the county determines to be the property tax rate, combined with additional percentages for local schools, city or town, and sanitation. With some variation, property taxes in Colorado work out to be around 7 to 8%.

Sales Tax:

Sales tax in Colorado is only 2.9%, however that number can and does increase generally in most municipalities and counties because of the addition of local taxes onto the state sales tax, usually to specifically fund particular services like local public transportation. By and large, though, the sales tax from town to town and county to county remains relatively low by national standards. The state sales tax is fairly uniform amongst all purchases in the state, and is exempt form unprepared foods and prescription drugs.

Full time Colorado residents are even allowed to claim a sales tax refund on their taxes paid when state revenues exceed limits imposed by the state constitution, though that has not happened in the last few years because of the economic climate.